Framework for Stimulating Information Philanthropy in Australia

Government 2.0 Taskforce Project 10:

“Framework for Stimulating Information Philanthropy in Australia”

Report by

Philanthropy Australia

November 2009

of 37 Government 2.0 Taskforce Project 10 “Framework for Stimulating Information Philanthropy in Australia”

Report by Philanthropy Australia November 2009

Page No.

Executive Summary 3.

1. Information Philanthropy 6. . Background 6. . Explaining ‘information philanthropy’ 7.

2. Current Legal and Technical Background in Australia 10. . Introduction to terms 10. . Philanthropy and giving structures in Australia 11. . Some observations for information philanthropy 12. . Charitable status and tax deductible status 12.

3. International Charity Regulation Regimes 17. . Comparisons to other countries 17. . Comparison table 19.

4. Framework for Stimulating Information Philanthropy in Australia 21. . Funding information philanthropy not-for-profit organisations 21. . Legislative and policy option 21. . Other options under the current system 23. . Case Study for a ‘public library’: OpenAustralia Foundation 25. . Restrictions of the ‘public library’ option 28. . Specially Listed DGR (Item 2) Foundation 29. . Other funding options 30. . Corporate and business funding and support 30.

5. Recommendations 33.

Bibliography 34.

Appendix: Foundation for Rural & Regional Renewal (FRRR) 36.

of 37 EXECUTIVE SUMMARY

The innovative and emerging area of information philanthropy is still a somewhat amorphous concept – primarily because the tools which can provide wide community access to information are very new and developing quickly. For the purposes of this report we are describing ‘information philanthropy’ as the provision and use of information in an on-line environment for beneficial social change, with particular reference to public sector information.

“Globally, there is a shift in thinking about how governments manage and make available the public sector information (PSI) that they produce. Increasingly, it is being realised that the release of public materials on terms and in formats that permit and enable use and reuse will deliver economic and social benefit, as well as drive innovation.” http://mashupaustralia.org/open-access-to-psi

These new information philanthropy organisations typically begin as grassroots volunteer groups working with little or no funding or capital. They use open-source software to build publicly accessible information assets, to enable use and reusing of public sector information for the public good. This means that sustainability is an issue and the potential for quality and quantity of the information and services long-term to be compromised.

In many cases, for these types of mission-based information philanthropy organisations, advertising- driven funding models and user-pays subscription-based models may not be appropriate or desirable. A donation-based funding model then becomes the most appropriate option in this space. This funding model would rely on a combination of donations from individuals and grants from philanthropic organisations, government and business.

Most donors (individuals, business/corporates, and philanthropic foundations and trusts) will want to fund structures rather than individuals. Organisational structures, particularly not-for-profit structures, have the advantage of meeting Australian Tax Office requirements, which then offers legitimacy and credibility inspired by this level of reporting. This gives a certain level of comfort to donors.

To be funded by an increasing number of charitable trusts or foundations in Australia, organisations must be formally structured as not-for-profit entities whose primary objective is something other than the generation of profit for its members/shareholders. Only not-for-profit organisations are entitled to endorsement as charities (TCC) or as deductible gift recipients (DGR).

Information philanthropy is a new and evolving concept and charity law, which is based on case law, can be blurry. In the first instance, the Australian Tax Office has described what they consider to be clearly eligible for endorsement as charities (TCC) or as deductible gift recipients (DGR). For everything else ac case for endorsement must be mounted. As a result obtaining DGR and TCC status for information philanthropy not-for-profit organisations is likely to be a long and arduous process and may or may not be successful.

While we do not believe there are ways to streamline this process in the current environment, there is no doubt that as the general population become more familiar with the on-line environment, applications to the Australian Tax Office for DGR and TCC status for organisations that, like OpenAustralia Foundation,

of 37 can demonstrate their qualifications as a ‘public library’ will become easier. However the biggest gap remains the lack of understanding of charitable purposes and charity law by accountants, lawyers, wealth advisors and the general community.

Foundations and Trusts are also required to abide by the relevant tax and charity law, both Commonwealth and State-based. This means a number of issues.

. Some foundations can only fund organisations that the ATO has endorsed as a DGR (Deductible Gift Recipient) . Some foundations can only fund organisations that the ATO has endorsed as a Tax Concession Charity (TCC) . Some foundations can only fund organisations that have both DGR and TCC endorsements . Some foundations can fund almost any not-for-profit entity provided that the funding is spent on activities which are legally charitable

To make this even more complicated, some foundations can only fund organisations that have a certain kind of DGR endorsement. There are two main kinds of DGRs:

. Item 1 DGRs, known informally as ‘doing’ DGRs. These are the organisations which carry out the hands-on work – health promotion organisations, counselling, welfare organisations, etc. . Item 2 DGRs known informally as ‘giving’ DGRs – which have no purpose other than to make or collect money in order to give it away.

The rule is that one ‘giving’ DGR cannot give to another ‘giving’ DGR – otherwise the money could go from foundation to foundation without any actually being spent on charitable activity. Most organisations that apply for grants from foundations will be a ‘doing’ DGR, but there are some entities which have been set up as fundraising foundations – often attached to a hospital or cultural entity – which are ‘giving’ DGRs. There are many foundations which cannot fund the ‘giving’ type of DGR.

The last major attempt to revise the definition of charity in the Australian system was in 2000 via the Charities Definition Inquiry. In June 2001 the Inquiry made a series of recommendations including the introduction of a statutory definition of charity with an enhanced definition of charitable purposes. A draft Charities Bill was released in July 2003 which encompassed seven heads of charity, in the spirit of the Inquiry’s recommendations. While this part of the Draft Bill raised only minor public comment, other provisions caused significant public comment and many submissions argued that the draft Bill would significantly limit the ability of charities to advocate. The Government did not proceed with the Draft Charities Bill, but instead enacted the Extension of Charitable Purpose Act 2004 which enlarged the charity law definition to include child care, self-help groups and closed religious orders.

The draft report of the current Productivity Commission review of the “Contribution of the Not-For-Profit Sector” has recommended that the Australian Government adopt a statutory definition of charitable purposes in accordance with the recommendations of the 2001 Charities Definition Inquiry. As in the UK definition, information philanthropy initiatives would potentially be included under a heading such as “the advancement of social and community welfare”.

Therefore we recommend supporting the adoption of a statutory definition of charitable purposes that incorporates the addition of a new DGR category, as the most secure and effective way to ensure a funding stream into the future. We believe this should be the ultimate aim of the Taskforce to work towards this end.

of 37 However, recognising budgetary constraints, any reforms emanating form the Productivity Commission and the Henry Tax Review will need to be implemented over time.

In the interim we suggest the establishment of a Specially Listed Deductible Giving Recipient (Item 2) foundation similar to the already established Foundation for Regional and Rural Australia, Australian Cultural Fund and Australian Sports Foundation. These three specially listed foundations operate in sectors of the not-for-profit sector which provide public goods and public benefit but which cannot attract philanthropic support because they do not qualify under the strict definition of “charitable purposes” in Australia - despite their importance to public policy and social objectives to benefit the community as a whole.

This specially listed structure is designed to allow all matter of donors (individuals, business/corporates, and philanthropic foundations and trusts) to donate to a DGR (Item 2) foundation while ensuring that they abide by the relevant tax and charity law, both Commonwealth and State-based, and meet all their legal requirements. Because of its special listing, this structure is able to give to non-DGR not-for-profit organisations. The success of Foundation for Rural and Regional Renewal (FRRR) as an efficient, well governed intermediary with specialist knowledge could be used as a model for the innovative and emerging area of ‘information philanthropy’ where DGR status may be difficult to secure.

There is no application process for entities such as a Specially Listed Deductible Giving Recipient (Item 2) foundation to apply to be named in the legislation. Inclusion is a political process.

Recommendations:

1. That the Government 2.0 Taskforce make a submission to the Productivity Commission:  highlighting the complexity of the definition of charity and charitable status in Australia; and  recommending the adoption of a statutory definition of charitable purposes that incorporates the addition of a new DGR category on ‘information philanthropy’, based on the definition of information philanthropy as philanthropic support for those not-for-profit organisations whose mission/purpose is to use or enable use or reuse of information in an on-line environment to increase community empowerment and civic participation for beneficial social change, with particular reference to use and re-use of public sector information. (deadline for submissions: 24 November 2009)

2. That given the budgetary constraints any reforms emanating form the Productivity Commission and the Henry Tax Review may need to be implemented over time, that the Government 2.0 Taskforce apply to the Federal Government to establish a Specially Listed Deductible Giving Recipient Foundation (Item 2), similar to the Australian Sports Foundation, to enable grants and subsidies from philanthropic donors to registered Australian not-for-profit organisations for the purposes of the initial development of projects that:  Reuse and re-mix Australian Government PSI for public access and benefit  Engage communities in projects that seek to enhance our democracy or the democratic process and the development of public policy.

of 37 Funded organisations must present a model for ongoing sustainability and should be structured and purposed to seek independent TCC and DGR status as their projects mature. Projects must be non- partisan.

of 37 1. ‘INFORMATION PHILANTHROPY’

Background

In today’s inter-connected world some of the most innovative models for social innovation will become those that can modularize, “crowdsource,” and aggregate small tasks. Philanthropy was once one-to-many in direction and amplitude, but today facilitated means of communication and synthesis online are enabling many-to-many philanthropic models to become widespread and increasingly powerful.

Many examples, such as Wikipedia.org and Kiva.org point to the cooperative behavior of individual actors willingly collaborating in the pursuit of a larger goal, a digital application of what Benkler argues to be pervasive human behavior. In the case of Wikipedia.org users donate their hard-earned time to edit the world’s most comprehensive encyclopedia, and on Kiva.org users pool money with others they don’t know to provide risky, zero-interest international loans to remote entrepreneurs.

Soon, one-to-many philanthropy will be supplemented by overlapping consensus, crowd-sourced, many-to-many social ventures that leverage the networked public sphere. To the extent that design can help communicate ideas, new models can be fungible, open-source, and free, and that new platforms can convert networked individuals into micro-activists, social entrepreneurs can supplement hope with human cooperation. Scott E. Hartley (Stanford, ’05) is a former Google.org Business Development Consultant and dual-degree MIA/MBA graduate student at Columbia University School of International & Public Affairs and Columbia Business School. He writes on Internet & Democracy for the Berkman Center for Internet & Society at Harvard Law School. http://www.ssireview.org/opinion/entry/open_source_altruism/

Collaborative knowledge creation is presently being reshaped by the use of Web 2.0 technologies.

Using Web 2.0 principles of openness, interoperability and collaboration, Web 2.0 initiatives are being used to increase the amount of cultural, educational, and scientific information available to the public for sharing, repurposing, and remixing. Any kind of information – from sonnets to statistics, genes to geodata – can be freely used, reused, and redistributed. Unrestricted by geographic, cultural or language barriers, individuals and communities are increasing their social interaction and community participation through the use of internet technologies. Web 2.0 initiatives give people forms of power they have either lost, or never had. They can make information on complex or technical aspects of society, like health care, the law, the media and processes of social change into common properties, and they make social interaction explicit.

The not-for-profit sector is also beginning to harness the power of Web 2.0 initiatives for social benefit. The next five to ten years will see a revolution in the use of information and communications technologies (ICT) by the not-for-profit sector as organisations seek to become more efficient and effective. In addition to building the capacity of not-for-profit organisations to grow and deliver programs

of 37 to scale, such initiatives will allow collaboration and data-sharing across ‘cause divides’ that have not previously been explored, leading to significantly enhanced outcomes for the community.

Giving individuals and communities a voice is an important part of opening up routes to power, civic and political. Web 2.0 tools can facilitate local interaction and promote a greater sense of community empowerment both on and off-line. However to really provide this empowerment of the general community, governments at all levels will need to be more open in sharing information with the public and engaging in a dialogue with the public.

Explaining ‘information philanthropy’

“From the formulation of public policy to more open forms of academic peer review, setting up mutual support groups for people facing similar health problems to collaborative forms of social innovation, the principles of open source promise to radically alter our approach to complex social problems.

The future potential of these methods is such that they will soon become common place in our lives. Just as it is now impossible to think about getting things done without considering the role of the internet, so will it soon be impossible to think about how to solve a large social problem without considering the role of open methods.”

“Wide Open: Open source methods and their future potential” by Geoff Mulgan, Tom Steinberg with Omar Salem, Demos 2005

The innovative and emerging area of information philanthropy is still a somewhat amorphous concept – new primarily because the tools which can provide wide community access to information are very new and developing quickly.

In describing ‘information philanthropy’ it is necessary to explore the characteristics of an organisation that would meet a public benefit test in this new online space, and in turn meet the philanthropic intent of a charitable foundation or trust.

We start with the premise that providing meaningful, easily accessible information to citizens and communities, service providers, and policymakers is a key part of creating solutions to improve the quality of public services and promote social inclusion. Better information can help governments, philanthropists, not-for-profit organisations and other providers spend scarce resources wisely. And, empowered by information, citizens and communities can demand better services from providers or develop new solutions to meet their own needs.

Wikipedia (an online encyclopaedia) and Linux (computer operating system software) are two free ICT initiatives that have become well known. Their success is founded on their ‘open source’ methods of development, where the source code or building blocks of the application are accessible for all to see, copy and change. Importantly, these initiatives are volunteer powered, internet enabled and geographically dispersed. They work on the self-organised model of community ownership and community moderation. They embody a new way of creating knowledge that combines an open and democratic ethos with an extraordinary ability to produce work of high quality and on a huge scale.

of 37 In 2005 in their book, “Wide Open: Open source methods and their future potential”, Geoff Mulgan, Tom Steinberg and Omar Salem from the Demos think-tank in the UK, defined the characteristics of open- source software. They then suggest three broad categories of activity observed in projects inspired by open source ideas:  Open knowledge: these are projects where knowledge is provided freely, and shaped, vetted and in some cases used by a wide community of participants. In these cases the common value of the knowledge being created is the primary concern.  Open team working: The loose communities of interest that work together through the internet to build projects like Wikipedia and Linux merge into a wider family of semi-open teams rooted in organisations. These generally have a clearly defined end goal.  Open conversations: These extend traditional forms of public discussion by constructing online conversations capable of handling more participants in more effective ways than previously possible. In these cases the process is as important as any goal.”

Areas they suggest in which these broad categories could be applied for the common good include the media, public sector, law, academia, arts, health, finance and social innovation.

In regard to the test of ‘public benefit’, we refer to the Report of the Inquiry into the Definition of Charities and Related Organisations (June 2001): http://www.cdi.gov.au/report/cdi_chap13.htm The following summary of principles regarding the interpretation of `public benefit’ has been established through the common law:  The object or purpose must be beneficial in itself, that is, it must be aimed at achieving a universal or common good; by definition, a purpose cannot be beneficial if it is harmful to the public.  `Benefit' is not limited to the delivery of material benefits, but can extend to include social, mental and spiritual benefits. However, it has been held by the courts that a basic requirement of a charitable gift is that it must be seen to have practical utility.  The `public' is taken to mean the general community or a `sufficient section of it'. This has been given clearer meaning through what has become known as the Compton/Oppenheim test, which indicates that the number of potential beneficiaries of a charity must not be numerically negligible, and there must be no personal relationship between the beneficiaries and any named person or persons.

We therefore suggest that for the purposes of this report we are describing ‘information philanthropy’ as the use of information in an on-line environment for beneficial social change, with particular reference to public sector information.

Not-For-Profit organisations that might meet this description are those that:  Inform individuals and communities of their rights, entitlements, choices, and quality of public services  Provide tools and information to increase access to and use of available services  Strengthen links between communities and policy makers

of 37 Example:

Mashup Australia http://mashupaustralia.org/open-access-to-psi/

Globally, there is a shift in thinking about how governments manage and make available the public sector information (PSI) that they produce. Increasingly, it is being realised that the release of public materials on terms and in formats that permit and enable use and reuse will deliver economic and social benefit, as well as drive innovation. This was recognised in the Australian Government’s recently released Australia’s Digital Economy: Future Directions paper and the Powering Ideas report.

The concept of “open access” means access on terms and in formats that clearly permit and enable such use and re-use by any member of the public. This is broader than simply providing mere access to material, which permits only reading of the material or limited non-commercial use. Because open access can facilitate use and re-use of government information, it can drive innovation in the digital economy and generate real economic and social benefits. It allows anyone with an innovative idea to add value to existing public sector information for the common good, often in initially unforeseen or unanticipated ways.

The reason that open access is important is that, without an express statement that public use and re-use is permitted, applicable law (in this instance, primarily copyright law) and the limited scope of standard licensing requires that companies and the public ask for permission before mashing up data. This includes Australian government materials because Australian law (unlike US law) recognises Crown copyright. This can create barriers and frictions to use and reuse that limit the economic and social benefit that may otherwise result from a more flexible approach.

of 37 2. LEGAL AND TECHNICAL BACKGROUND IN AUSTRALIA

In the “Trustee Handbook: Roles and duties of trustees of charitable trusts and foundations in Australia” David Ward highlights some of the difficulties of ensuring funded organisations have the correct legal status. For example, specifically for non ITEF Ancillary Funds and PAFs:

“……..ensuring potential grant recipients have both TCC and DGR is critical. There are some tools to assist in checking whether organisations are, or are not, eligible, but there are considerable complexities.”

Using the Australian Business Register will indicate the entity type and its tax concession status. However Ward cautions:

“Public Benefit Institutions”, and “Health Promotion Charities” are both forms of charities delivering services to the community and are therefore conducting charitable purpose. If the organisation is a “Charitable Institution” it is likely (but not definitely) to be an active or “doing charity” and if it’s a “Charitable Fund” it is likely (but not definitely) to be another grantmaking foundation to which grants cannot be made.”

Introduction to terms

 Charity/charitable The majority of philanthropic trusts must fund charitable purposes. The terms ‘charity’ and ‘charitable purpose’ have a legal meaning which differs from the popular understanding of the terms. Throughout this report, the terms are used as follows:

Charitable – purposes which are charitable under Australian law Charity – an entity which has been endorsed as a Tax Concession Charity (TCC) by the Australian Taxation Office

 Deductible Gift Recipient (DGR) A DGR is a fund or organisation that has been endorsed by the Australian Taxation Office as a deductible gift recipient, meaning that donors can claim a tax deduction for donating to that organisation. Some DGRs are listed by name in the income tax law. For other organisations to be DGRs, they must fall within a general category set out in the income tax law. Examples include public benevolent institutions, public universities, public hospitals and school building funds.

 Foundation The word ‘foundation’ has no legal meaning. Throughout this report it is used to indicate a charitable trust which exists for the purpose of making grants to not-for-profit organisations.

 Not-for-profit / non-profit A not-for-profit (or non-profit) organisation is an organisation whose primary objective is something other than the generation of profit for its members/shareholders. Only not-for-profit organisations are entitled to endorsement as charities or as deductible gift recipients. However, the majority of not-for- profit organisations have neither endorsement, either because they are too small for endorsement to be worth the effort, or because they are not eligible.

of 37 Philanthropy and giving structures in Australia

Formal philanthropic structures in Australia are as follows:

 Testamentary or Will Trusts These are the oldest form of existing foundations in Australia. They are established by a Will and do not come into operation until after the benefactor’s death. The majority of them are Tax Concession Charities and therefore income tax exempt but donations to them are not tax deductible. They are not limited to funding DGRs unless it is stipulated in the will that they do so, but they must fund the charitable purposes specified in the Will.

 Private Charitable Trusts These have been established during a donor’s lifetime through trust deed. They are able to obtain TCC status and therefore income tax exemption, but donations to them are not tax deductible. They are not limited to funding DGRs unless it is stipulated in the trust deed that they do so, but they must fund the charitable purposes specified in the deed.

 Private Ancillary Funds (PAFs) The Prescribed Private Fund (PPF) structure was established in 2001 and was redeveloped as the Private Ancillary Fund (PAF) structure in 2009. There have been over 800 PAFs established making them the fastest growing form of philanthropy in Australia. Donations to PAFs are tax deductible and they can in turn only fund other DGRs. The majority of PAFs are also charitable, and they must therefore fund DGRs which also have TCC status, but it is possible in some States to establish a PAF which is income tax exempt but not charitable. This allows granting to a wider variety of DGRs (depending on the State in which the PAF is established).

The PAF structure is particularly attractive to families and “new donors” who are seeking a tax effective structure.

 Ancillary (Public) Funds Sometimes just called public funds, these are established by trust deed for the support of charitable organisations. They are charities, and donations to them are tax deductible; in return the foundation can only fund other DGRs which also have TCC status. (Can also become ITEFs like PPF/PAFs) Ancillary funds must be controlled by a committee, the majority of which have a degree of responsibility to the general public, and the public must also contribute to the fund. Because of the requirement for public contributions and public participation, ancillary funds are not generally used by high-net-worth individuals. The structure is often used as a fundraising vehicle for hospitals and charitable organisations, or for foundations which maintain “sub-accounts” for individual donors such as community foundations.

 Companies While the vast majority of grantmaking philanthropic entities are trusts, a number are companies which operate a public fund for grantmaking and which are specifically named in the tax legislation.

of 37 Some Observations for Information Philanthropy

In examining the suitability of philanthropic structures for the funding of ‘information philanthropy’ we make the following observations:  Many testamentary trusts are unlikely to fund information philanthropy initiatives not only because such initiatives are not charitable at law, but also because they are unlikely to fit into the purposes for which the trust was originally created.  Only charitable trusts can be perpetual; non-charitable trusts cannot exist in perpetuity. Perpetuity is a major incentive for High Net Worth (HNW) individuals who wish to use their foundation as a catalyst to bring the family together and to extend their philanthropic values to further generations. Therefore in order to attract HNW individuals to establishing foundations which are solely or partly focused on funding information philanthropy initiatives and organisations, it would be of most advantage for such initiatives to fall into the legal definition of charitable purposes.  Tax incentives do not generally govern whether an individual gives. However, tax incentives including particularly tax deductibility are an important factor governing the level of giving. Therefore it would be more advantageous to attracting backing from HNW individuals if such initiatives were able to attract DGR status and provide donors with a tax deduction.  A number of HNW individuals have established Private Ancillary Funds (PAFs) and prefer to do their giving via this tax effective structure. As such funds must give to organisations which are DGRs, and most must give to DGRs with TCC status, it would be preferable if information philanthropy initiatives or organisations established for that purpose were able to attract DGR and TCC status  Engagement in information philanthropy initiatives is highly likely to come from HNW individuals and other highly motivated “new donors” who are not traditional philanthropists with inherited wealth, but come from a more entrepreneurial business background. Some of the “new donors” have made money in internet-based technologies and will be far more motivated to engage with such initiatives than existing and older trusts.

Charitable status and tax deductible status

Attracting philanthropic support, either from foundations or from individual donors, is dependent on two endorsements in Australia – Deductible Gift Recipient and Tax Concession Charity. The majority of other countries have only one level so that all charities are automatically entitled to all tax concessions. In Australia, being a charity does not automatically entitle an organisation to (for instance) offer a tax deduction to its donors. Tax deductibility is covered by the separate category of DGR endorsement.

Endorsement to access charity tax concessions is the approval process a charity must follow if it is to access one or more of the following concessions:  income tax exemption  GST charity tax concessions  FBT rebate, or  FBT exemption.

Foundations and Trusts are required to abide by the relevant tax and charity law, both Commonwealth and State-based. For those seeking funding, this means a number of issues.

of 37  Some foundations can only fund organisations that the Australian Tax Office (ATO) has endorsed as a DGR (Deductible Gift Recipient)  Some foundations can only fund organisations that the ATO has endorsed as a Tax Concession Charity (TCC)  Some foundations can only fund organisations that have both DGR and TCC endorsements  Some foundations can fund almost any not-for-profit entity provided that the funding is spent on activities which are legally charitable

To make this even more complicated, some foundations can only fund organisations that have a certain kind of DGR endorsement. There are two main kinds of DGRs:

 Item 1 DGRs, known informally as ‘doing’ DGRs. These are the organisations which carry out the hands-on work – health promotion organisations, counselling, welfare organisations, etc.  Item 2 DGRs known informally as ‘giving’ DGRs – which have no purpose other than to make or collect money in order to give it away.

The rule is that one ‘giving’ DGR cannot give to another ‘giving’ DGR – otherwise the money could go from foundation to foundation without any actually being spent on charitable activity. Most organisations that apply for grants from foundations will be a ‘doing’ DGR, but there are some entities which have been set up as fundraising foundations – often attached to a hospital or cultural entity – which are ‘giving’ DGRs. There are many foundations which cannot fund the ‘giving’ type of DGR.

of 37 1. Tax Concession Charity (formerly ITEC) charitable •Government control eg public schools •Sport Re TCC & public institutions: Not charitable: •Political Minister controls Board appts; •Private Govt owns institutions; •Membership bodies Not charitable to give to Govt

2. Deductible Giving Recipient (DGR) Issue for Indigenous & Rural communities – Very few ‘Doing DGR’ Public/ PPF: New structure; Giving DGR Ancillary Only give to Non-charitable Fund Charitable + DGR: only exist DGR For 80 years Hospitals ASF

Public Cultural Environ. Unis Libraries Harm Health Doing DGR Benevolent Orgs Orgs TAFE Museums Prevention Promotions Institution Bldg funds Specially Listed Eg RSPCA, LAL, FRRR, (direct relief Register of Register of New: Register Amnesty of suffering: Cultural Environment Educational FACSIA not preventative) Orgs Orgs Scholarship Fed Arts Fed Enviro funds

1. Charity law and endorsement as a Tax Concession Charity (TCC) Many trusts are required to fund either charities or charitable purposes. Charities are entities whose sole purpose is charitable; in practical terms proof of an entity’s charitable status is considered to be endorsement by the ATO as a Tax Concession Charity. "Charitable purposes" is more difficult to define as there is no statutory definition. The definition of charity in Australia is a common law definition based on the Statute of Elizabeth (dated 1601). The modern interpretation is from the 1800s and defines four “heads of charity”. This definition still survives in Australia. The four heads of charity are:

 the relief of poverty  the advancement of education  the advancement of religion  other purposes beneficial to the community not falling under any of the preceding heads

While the last seems broad, it is more restrictive than at first glance. The ATO is the body responsible for endorsing entities as charitable and has set out the purposes which are not charitable as being:

 The purpose is to confer private benefits  The purpose is sporting, recreational or social

of 37  The purpose is illegal or against public policy  The purpose is political or lobbying  The purpose is commercial  The purpose is governmental  The purpose is vague or insufficient value for the community.

If endorsed as a charity, an organisation is entitled to access tax concessions including income tax exemption. It is not, however, entitled to offer a tax deduction automatically.

Not all charities are entitled to be endorsed as DGRs, and not all DGRs are charitable at law. Examples of organisations which are charitable but not entitled to DGR endorsement include:  Peak bodies  Advocacy groups

Examples of entities which are entitled to endorsement as DGRs but may not be charities include:  Public schools  Public hospitals  Public libraries, museums and art galleries

An entity considered to be an arm of government carrying out a normal government function may be entitled to endorsement as a DGR, but it is not considered to be a charity at law.

2. Deductible Gift Recipient status (DGR) Being endorsed as a Deductible Gift Recipient enables an organisation to offer a tax deduction for donations. This is a primary factor in attracting donations from the public. It also entitles certain types of DGR organisations to other concessions including FBT exemption.

In order to receive DGR endorsement an organisation must fall into one of the categories specified in the Income Tax Assessment Act 1997. The broad headings of these categories are:

 Health  Education  Research  Welfare and rights  Defence  Environment  The family  International affairs  Sports and recreation  Cultural organisations  Ancillary funds

There are detailed categories within each of these headings, and an organisation must fall within one of these categories. For example, the heading ‘Education’ has fourteen categories.

There are also certain entities which are named in the DGR legislation, most of which do not fall into any of the categories within the table. There is no application process for entities which do not fall into

of 37 DGR categories to apply to be named in the legislation. Inclusion is a political process and is generally not initiated by organisations.

DGR is an important factor in both philanthropic support and public support.

 Philanthropic support Many philanthropic trusts, including all PAFs (formerly PPFs) and Public Ancillary Funds are themselves DGRs. This means that by law they can only make grants to other DGRs.

 Private support Offering a tax deduction to donors may not necessarily affect the decision to give, but evidence supports the supposition that it affects the amount they give, when they give and to whom they give. This is particularly true of high-net-worth individuals.

DGR is not the only criteria for philanthropic trusts. Charitable status, while it has little effect on garnering public support, is a vital element for most philanthropic trusts. A majority of Will trusts are limited by law to funding only entities with charitable purposes. Some are limited to funding charitable organisations, that is, those which are endorsed as Tax Concession Charities by the Australian Taxation Office.

of 37 3. INTERNATIONAL CHARITY REGULATION REGIMES

Unlike Australia which has two separate charitable endorsements which determines different tax concessions – Deductible Gift Recipient and Tax Concession Charity –, the majority of other countries have only one level of endorsement meaning that if an organisation is endorsed as a charity it is automatically entitled to all tax concessions.

Comparisons to other countries

United Kingdom

In the UK, a statutory definition of charity was legislated in 2006 (Charities Act 2006). This redefined charitable purposes in the UK, providing 12 specific heads of charity and one general one.

The list is:  The prevention or relief of poverty  The advancement of education  The advancement of education  The advancement of religion  The advancement of health or the saving of lives  The advancement of citizenship or community development  The advancement of the arts, culture, heritage or science  The advancement of amateur sport  The advancement of human rights, conflict resolution or reconciliation, or the promotion of religious or racial harmony or equality and diversity  The advancement of environmental protection or improvement  The relief of those in need by reason of youth, age, ill-health, disability, financial hardship or other disadvantage  The promotion of the efficiency of the armed forces of the Crown, or the efficiency of the police, fire and rescue services or ambulance services; and  Other purposes that are currently recognised as charitable or are in the spirit of any purposes currently recognised as charitable

Clearly information initiatives, depending upon their application, could find a fit in one of these expanded categories. To take mysociety.org as an example, it falls under the head of “The advancement of citizenship or community development”.

United States of America

In the US the relevant status is “nonprofit”, commonly also known as a 501 (c)(3) organisation. Nonprofit organisations are exempt from income tax and also able to offer a tax deduction for donations. Charities are included in the definition of “nonprofit organisations”. The relevant definitions are listed in section 501 (c) (3) of the United States Internal Revenue Code. The eligible purposes in the Code are:

 Religious  Charitable

of 37  Scientific  Testing for public safety  Literary  Educational  To foster national or international amateur sports competition  To promote the arts  For the prevention of cruelty to children or animals

As there is only one level of endorsement, regulation surrounding which entities a philanthropic trust can grant to is much simpler. This means that US tax code enables foundations to obtain 501 (c) (3) status and to grant to any other 501 (c) (3) organisation regardless of whether it falls into the definition of “charitable”.

The US definition of “charitable” is also broader than that in Australia, being defined as “organized and operated for purposes that are beneficial to the public interest”. A number of examples are given:

 Relief of the poor, the distressed or underprivileged  Advancement of religion  Advancement of education or science  Erection or maintenance of public buildings, monuments or works  Lessening the burdens of government  Lessening of neighbourhood tensions  Elimination of prejudice and discrimination  Defence of human and civil rights secured by law  Combating community deterioration and juvenile delinquency

Information philanthropy initiatives, depending upon their application, could find a fit in several categories. An initiative such as mysociety.org could fit into ‘Lessening the burdens of government’ or into ‘Combating community deterioration’.

Canada

The Canadian situation is similar to the Australian except that there is only one level of tax concessions, being charitable status. Canada follows the same four heads of charity as Australia does and endorsement is provided by the Canada Revenue Agency. Charitable entities are entitled to provide tax deductions for donations and they are entitled to some tax concessions such as GST rebates.

It is unlikely that the majority of information philanthropy initiatives would obtain charitable status under Canadian law.

New Zealand

The New Zealand Charities Commission has been established to register and monitor charities as well as provide the charitable sector with management and good governance advice. The New Zealand definition of “charitable purposes” follows the same four heads of charity as the Australian one. Charities

of 37 are entitled to exemption from income tax. Charities and some non-charitable entities can offer donors a tax deduction for donations.

It is unlikely that majority of information initiatives such as mysociety.org would obtain charitable status under New Zealand law.

The following table examines whether some examples of Australian and international information philanthropy initiatives would attract charitable tax status internationally.

Comparison Table

Australia USA Canada UK NZ Mysociety.org Ineligible; not Qualifies as 501 Not charitable Qualifies as Not charitable legally (c) (3) charitable charitable; ineligible for DGR Inspire Eligible for Qualifies as 501 Qualifies as Qualifies as Qualifies as charitable (c) (3) charitable charitable charitable status and DGR and for philanthropy Wikimedia May be legally Qualifies as 501 May qualify as Qualifies as May qualify as Foundation charitable; (c) (3) charitable charitable charitable ineligible for DGR Connecting Eligible as a Would qualify as May qualify as May qualify as May qualify as Up charity but not 501 (c) (3) charitable charitable charitable eligible for DGR GetUp Not legally May qualify as Not charitable Not charitable Not charitable charitable; 501(c)(3) ineligible for organisation but DGR would not be eligible for philanthropy as primarily advocacy TechSoup May be legally Qualifies as 501 May qualify as Qualifies as May qualify as Global charitable; (c) (3) charitable charitable; charitable ineligible for eligible for DGR philanthropy

of 37 MySociety.org – UK based. Two missions: the first is to be a charitable project which builds websites that give people simple, tangible benefits in the civic and community aspects of their lives. The second is to teach the public and voluntary sectors, through demonstration, how to use the internet most efficiently to improve lives. Runs democracy and transparency websites including TheyWorkForYou (providing information on individual MPs) and FixMyStreet (notifies local authorities of graffiti, broken footpaths and other civic problems). http://www.mysociety.org/

Inspire Foundation – Australian based. Established in 1996, uses internet-based technologies to improve mental health of young people and reach young people at risk of suicide or mental illness. As it works direct with young people in need is a Public Benevolent Institution (PBI). Seed funded initially through Microsoft. Inspire runs a web 2.0 based program, ActNow - http://www.actnow.com.au/ - which inspires young people to learn more about the world and take action on issues they care about. http://www.inspire.org.au/

TechSoup Global – US based. TechSoup Global is a 501(c)(3) nonprofit organization working towards the day when every nonprofit, library, and social benefit organization on the planet has the technology knowledge and resources they need to operate at their full potential. http://home.techsoup.org

Connecting Up – Australian based. Provides tools and resources to build and strengthen not-for-profit sector by enabling them to join up and have meaningful conversations. Connecting Up is a charity but not a Deductible Gift Recipient. http://www.connectingup.org/

GetUp – Australian based. “GetUp is an independent, grass-roots community advocacy organisation giving everyday Australians opportunities to get involved and hold politicians accountable on important issues”. GetUp is web-based. As an advocacy organisation GetUp is not eligible for either charitable status or endorsement as a DGR. http://www.getup.org.au/

Wikimedia Foundation – US based. “The mission of the Wikimedia Foundation is to empower and engage people around the world to collect and develop educational content under a free license or in the public domain, and to disseminate it effectively and globally.” The Wikimedia Foundation has 501(c)(3) tax exempt status in the United States. http://wikimediafoundation.org/wiki/Home

of 37 4. FRAMEWORK FOR STIMULATING INFORMATION PHILANTHROPY

Funding information not-for-profit organisations

Typically, ‘information philanthropy’ organisations begin as grassroots volunteer groups working with little or no funding or capital. This means that sustainability is an issue and the quality and quantity of the information and services long-term may be compromised. There are three main funding models:

1. An advertising-driven funding model for information organisations may not be appropriate or desirable.

2. A user-pays subscription-based model presumes that the user has the capacity to pay and may or may not generate enough funding to be sustainable. Subscriptions may also limit the wider community usage and interaction provided by social media tools.

3. A donation-based funding model is most common in the not-for-profit space. This funding model would rely on a combination of donations from individuals and grants from philanthropic organisations, government and business.

While this report deals with information philanthropy, the importance of government funding of all programs, processes and organisations without DGR status, which cannot attract foundation funding, needs to be recognised.

Legislative and policy option

The case for statutory definition of charitable purposes and how it impacts on “information philanthropy”

“By letting a thousand flowers bloom, philanthropy can contribute to a vibrant and diverse civil society, one in which multiple and competing conceptions of the public good can coexist. Philanthropy is a counterbalance to the tendency of government toward bureaucratisation. By celebrating and promoting pluralism, philanthropy contributes to the decentralisation of power in society.” “Strategic Giving: The Art and Science of Philanthropy” , Peter Frumkin

The UK experience provides appropriate guidance for Australia’s future direction. Operating under the same four heads of charity as Australia currently does, the Prime Minister’s Strategy Unit published Private Action, Public Benefit; a review of charities and the winder not-for-profit sector in September 2002. A central argument for adding additional heads of charity was the Government’s strategy for the not-for-profit sector. The first of the strategy’s four main strands was:

Helping charities and other not-for-profit organisations play a bigger role in revitalising communities and empowering citizens: . building social cohesion and inclusion by involving citizens; . tackling social problems through enhanced local initiative and responsibility; and

of 37 . increasing economic activity and employability in local communities1.

The report recommended that charity be redefined in law based on the principle of public benefit, and that the additional heads of charity be introduced as exemplars. The question of civic participation was clearly addressed:

Voluntary participation in the range of areas spanned by charity is critical because it promotes active citizenship, which is vital for building strong communities and ensuring that those who live in them are at the forefront in making the decisions which affect them. Most forms of active citizenship – except those which are political – will continue to be charitable under one of the ten purposes as will the promotion of active citizenship as a means to achieving a charitable objective2.

Following reports by the Home Office in July 20033, and the Joint Committee on the Charities Bill in September 2004, the Charities Act 2006 was enacted in November 2006.

It is worth noting that none of these reports specifically mention information philanthropy, accessibility of information or Web 2.0 based initiatives as a charitable purpose. However, the broadening of the definition of charity means that the majority of such initiatives which are undertaken for the public benefit are charitable. The Strategy Unit report suggests that a statutory definition will lead to recognition of further purposes as charitable:

With the new statutory definition, objects will be accepted over time by analogy to existing case law, or based on evidence of public benefit from first principles.

The last major attempt to revise the definition of charity in the Australian system was in 2000 via the Charities Definition Inquiry (CDI). In June 2001 the Inquiry made a series of recommendations including the introduction of a statutory definition of charity with an enhanced definition of charitable purposes. A draft Charities Bill was released in July 2003 which encompassed seven heads of charity, in the spirit of the CDI’s recommendations. While this part of the Draft Bill raised only minor public comment, other provisions caused significant public comment and many submissions argued that the draft Bill would significantly limit the ability of charities to advocate. The Government did not proceed with the Draft Charities Bill, but instead enacted the Extension of Charitable Purpose Act 2004 which enlarged the charity law definition to include child care, self-help groups and closed religious orders.

The draft report of the current Productivity Commission review of the “Contribution of the Not-For-Profit Sector” has recommended that the Australian Government adopt a statutory definition of charitable purposes in accordance with the recommendations of the 2001 Charities Definition Inquiry. The 2001 recommendation is as follows:

Charitable purposes shall be:  The advancement of health, which without limitation includes: o The prevention and relief of sickness, disease or of human suffering;

1 Cabinet Office Strategy Unit. Private Action, Public Benefit: A review of charities and the wider not-for-profit sector. September 2002, p.32 http://www.cabinetoffice.gov.uk/media/cabinetoffice/strategy/assets/strat%20data.pdf 2 ibid., p.40 3 The Home Office. Charities and Not-for-Profits: A Modern Legal Framework. July 2003. http://www.cabinetoffice.gov.uk/media/cabinetoffice/third_sector/assets/charitiesnotforprofit_eng.pdf

of 37  The advancement of education;  The advancement of social and community welfare, which without limitation includes: o The prevention and relief of poverty, distress or disadvantage of individuals or families; o The care, support and protection of the aged and people with a disability; o The care, support and protection of children and young people; o The promotion of community development to enhance social and economic participation; and o The care and support of members or former members of the armed forces and the civil defence forces and their families;  The advancement of religion;  The advancement of culture, which without limitation includes: o The promotion and fostering of culture; and o The care, preservation and protection of the Australian heritage;  The advancement of the natural environment; and  Other purposes beneficial to the community, which without limitation include: o The promotion and protection of civil and human rights; and o The prevention and relief of suffering of animals.

As in the revised UK definition, while social media, information philanthropy and participatory web technology are not specifically mentioned, initiatives such as mysociety.org would potentially be included under heading such as “the advancement of social and community welfare”.

Therefore we recommend supporting the adoption of a statutory definition of charitable purposes that incorporates the addition of a new DGR category, as the most secure and effective way to ensure a funding stream into the future. We believe this should be the ultimate aim of the Taskforce to work towards this end.

Other options under the current system

If as a not-for-profit organisation your mission, objectives and activities clearly meet all the requirements listed under the relevant category for DGR status and TCC status, then applications to the Australian Tax Office are relatively straightforward and may only take a couple of months.

However, if as a not-for-profit organisation your mission, objectives and activities, may or may not meet all the requirements listed under the relevant category for DGR status and TCC status, then applications to the Australian Tax Office can be an arduous process and can take several years. These applications may or may not be successful.

Individual not-for-profit (NFP) organisations that are not considered to be a charity at law do not qualify for TCC status and/or do not meet the definition of charitable purposes so do not qualify for DGR status, may have specific areas of their work that can be separated out to meet other options.

of 37 Option for DGR Status Issues Meet Aspirations NFP sub-fund with a Community  Sub-fund has to give $$ to  Would allow Foundations and Foundation or Donor-Advised DGR for Trusts and Trusts to fund Fund eg Melbourne Community Foundations to meet their information/research/material Foundation legal requirements that could be used by the  Research $$ could be given NFP for NFP not to NFP  Would allow Foundations and  Lose some control over Trusts to fund a body of donated $$, especially if knowledge on information Community Foundation philanthropy Board changed views etc over time NFP to partner with research  Trusts & Foundations could  Would allow Foundations and institution give $$ to the institution for Trusts to fund research on information information/research material philanthropy that NFP could that could be used by NFP use  Would allow Foundations and  Research $$ to institution not Trusts to fund a body of NFP knowledge on information  No real control over $$ philanthropy NFP to set up a “Public Library”  NFP Control  Allow Foundations and Trust as a separate entity  Trusts & Foundations could to fund NFP activities give $$ to Library for  Assist in covering some costs o a nationwide open for NFP but restricted to access public digital ‘public library’ activities only. reference library;  Build information/research o research into the use and material produced by NFP effects of information and  Build body of knowledge on communication information philanthropy in technologies relating to Australia and overseas public engagement  Building endowment for o developing tools to information philanthropy in enable the sharing of Australia information for the purpose of improving such engagement; o disseminate research results for free reuse for the public good; o Provide content and software under an open licence wherever practicable; o to create a network for related local, online and library communities;

of 37 Information philanthropy is a new and evolving concept and charity law, which is based on case law, can be blurry. In the first instance, the Australian Tax Office has described what they consider to be clearly eligible for endorsement as charities (TCC) or as deductible gift recipients (DGR). For everything else a case for endorsement must be mounted. As a result obtaining DGR and TCC status for information philanthropy not-for-profit organisations is likely to be a long and arduous process and may or may not be successful.

While we do not believe there are ways to streamline this process in the current environment, there is no doubt that as the general population become more familiar with the on-line environment, applications to the Australian Tax Office for DGR and TCC status for organisations that, like OpenAustralia Foundation, can demonstrate their qualifications as a ‘public library’ it will become easier. However the biggest gap remains the lack of understanding of charitable purposes and charity law by accountants, lawyers, wealth advisors and the general community.

Case Study for a ‘public library’

OpenAustralia Foundation Limited http://blog.openaustralia.org/foundation

OpenAustralia is a website designed to make it easy for people to keep tabs on their elected representatives in Parliament. It was founded by Matthew Landauer and Katherine Szuminska, to bring Parliamentary Hansard to the general public in a really easy to use form. In addition the Register of Members’ and Senators’ Interests is now online for the first time. In time they plan to make other public sector information easier to access for everyone.

To attract financial support, Matt Landauer set up not-for-for profit organisation OpenAustralia Foundation Limited, as an Australian public company. Initially he was advised that OpenAustralia Foundation would not qualify for TCC or DGR status as the work of OpenAustralia does not meet the current Australian Tax Office guidelines for charities. However undeterred he argued that despite not having a physical presence, the work of OpenAustralia Foundation meets the guidelines of a ‘public library’ which resides under the Register of Cultural Organisations, administered by the Federal Minister for Environment and the Arts. In July 2009 OpenAustralia Foundation obtained the follow tax status:  OpenAustralia Foundation Limited, a charitable institution*, is endorsed to access the following tax concessions: o GST Concession: from 7 July 2009 o Income Tax Exemption: from 7 July 2009 o FBT Rebate from 7 July 2009

 OpenAustralia Foundation Limited is endorsed as a Deductible Gift Recipient from 7 July 2009.

*A Charitable Institution is an institution that is established and run to advance or promote a charitable purpose.

of 37 A full listing of the requirements for DGR status for all categories, including public libraries can be found on the Australian Taxation Office website at: http://www.ato.gov.au/nonprofit/content.asp? doc=/content/18699.htm

In the table below the left hand column highlights the criteria for a ‘public library’ as outlined on the Australian Tax Office website. The right hand column outlines how the constitution of OpenAustralia Foundation Limited meets the key areas of the criteria for a ‘public library’.

Excerpts from Endorsed DGRs – Gift Pack on OpenAustralia Foundation the Australian Tax Office website

Public library,  OpenAustralia Foundation is a separately Common characteristics: constituted organisation with a constitution, a Board of Directors, provisions for  it is owned or controlled by a government or quasi-government authority, or by Membership and reporting guidelines persons or an institution having a degree including a requirement for an Annual of responsibility to the public General Meeting  its collection is made available to the public  The constitution and objects state explicitly  it is constituted as a library, other people that the information (or collection) is to be recognise it as such, and it conducts itself made available to the public. in the ways that are consistent with such a character, and  OpenAustralia Foundation’s objects make it  it is an institution. clear that people would recognise OpenAustralia Foundation as an ‘on-line’ public library.

Public ownership and control  OpenAustralia Foundation is a separately Non-government institutions must be owned or constituted organisation with a constitution, a controlled by persons or institutions who, because Board of Directors, provisions for Membership of their tenure of some public office or their and reporting guidelines including a requirement position in the community, have a degree of for an Annual General Meeting responsibility to the community as a whole.

Available to the public  The constitution and objects state explicitly A public library makes its collection* available to that the information (or collection) is to be the public. made available to the public. Limits that make a collection substantially available only to members of an association or employees of a particular employer are not acceptable.

* The description ‘collection” is generally understood to cover both physical and on-line material

of 37 Excerpts from Endorsed DGRs – Gift Pack on OpenAustralia Foundation the Australian Tax Office website Purpose and function as a library,  The objects for which the Open Australia The term ‘library’ has its ordinary meanings. It has Foundation is established are: been described as follows:  library: a place set apart to contain books 1. to support a nationwide open access and other literary material for reading, public digital reference library for the study or reference purpose of making information relating to public bodies accessible and useful for The constituent or governing documents of a all Australians; public library must be consistent with its character. 2. to conduct research into the use and Also, an organisation’s activities, acquisitions effects of information and policy, staffing, advertising and membership will communication technologies relating to be relevant. public engagement and developing tools to enable the sharing of information for The ways an organisation collects, preserves, the purpose of improving such maintains and makes its collection available must engagement; be consistent with how a library operates. 3. to disseminate the results and methods of this research for the benefit and Possessing things that could form the collection of education of the public; a public library, is not sufficient. 4. to provide tools and services to both public and private bodies or institutions, and the general public, to enable them to reuse such data and research freely and for the public good; 5. to provide content and software under an open licence wherever practicable; 6. to create a network for related local, online and library communities;

 Open Australia Foundation must pursue charitable purposes only and must apply its income in promoting those purposes.  Open Australia Foundation must manage payments and gifts to the Company and ensure that they are used to further the stated objects of the Company.

of 37 Excerpts from Endorsed DGRs – Gift Pack on OpenAustralia Foundation the Australian Tax Office website

OpenAustralia Foundation is separately constituted A public library will be: organisation with a constitution, a Board of  a separate legal entity, such as a Directors, provisions for Membership and corporation or trust, or reporting guidelines including a requirement  a part of a legal entity where that part has for an Annual General Meeting. a separate institutional character.

For a part of an organisation to be a public library, it will be necessary that:  the affairs of the library are separate from the general affairs of the organisation  the public can readily distinguish the library from the rest of the organisation  the collection is readily identifiable to the public as the collection of a library,  the accounts of the library are separate from those of the rest of the organisation, and  any gifts made to the library will be used only for library purposes.

It took Mr Landauer a year to obtain the DGR and TCC status for OpenAustralia Foundation under the ‘public library’ category. Although this appears to have taken a long time to achieve, in fact Mr Landauer followed the usual process and twelve months is considered a relatively short time for an organisation whose mission, objectives and activities, may or may not meet all the requirements listed under the relevant category for DGR status and TCC status. In all cases across the not-for-profit sector where organisations do not clearly fit in the designated categories, applications to the Australian Tax Office can be an arduous process and can take up to a couple of years. These applications may or may not be successful.

From Philanthropy Australia’s point of view, we do not believe this sets a precedent, as OpenAustralia Foundation in its current form complies with most of the descriptions of a ‘public library’ as set out by the Australian Tax Office. In addition two years ago Philanthropy Australia received similar advice in respect to the Philanthropy Australia wiki and our publicly available on-line information.

Restrictions of the ‘public library’ option

OpenAustralia will have to restrict the Open Australia Foundation’s activities to those that fall within the description of ‘public library’; any other activities may fall outside of this strict definition and may cause issues in the future. If the OpenAustralia Foundation undertakes activities that could be construed as advocacy, lobbying, policy development, or activities that would not be performed by a ‘public library’, they risk losing their DGR status. Limits that make the information they provide substantially available only to members of OpenAustralia Foundation will not acceptable. Generally public libraries do not take a stand on issues or support a particular part of the community over another.

of 37 In addition if OpenAustralia Foundation moved too far from an ‘on-line public library’ into the areas such as building websites or organising public events, no matter how worthy, this may not be deemed part of a library’s function and therefore they would risk losing their DGR status. However it should be noted that all public libraries run sessions or do 1-on-1 teaching of web searching.

As information philanthropy is a new field and the ideas, innovations and technology are developing very quickly, it is easy to imagine that a new activity or innovation may fall outside the current description of a ‘public library’ and jeopardise DGR status.

An organisation like The Open Forum, for example, given the way it appears to be set up, does not seem to meet criteria for a ‘public library’ or undertake 'public library' activities. Therefore it would be unlikely to achieve DGR status.

Specially Listed DGR (Item 2) Foundation

Some sectors of the not-for-profit sector which provide public goods and public benefit cannot attract philanthropic support because they do not qualify under the strict definition of “charitable purposes” in Australia, despite their importance to public policy and social objectives to benefit the community as a whole.

In response one type of model or mechanism that could be considered in relation to “information philanthropy”, is that of a Specially Listed Deductible Giving Recipient (Item 2) organisation that can give to non-DGR eligible NFP and individuals. This specially listed structure is designed to allow all matter of donors (individuals, business/corporates, and philanthropic foundations and trusts) to donate to a DGR (Item 2) foundation while ensuring that they abide by the relevant tax and charity law, both Commonwealth and State-based, and meet all their legal requirements. Because of its special listing, this structure is able to give to non-DGR not-for-profit organisations.

One such example is the success of Foundation for Rural and Regional Renewal (FRRR). FRRR as an efficient, well governed intermediary with specialist knowledge, could be used as a model for the innovative and emerging area of ‘information philanthropy’ where DGR status may be difficult to secure.

There is no standard application process for entities such as a Specially Listed Deductible Giving Recipient (Item 2) foundation to apply to be named in the legislation. Inclusion is a political process.

The Australian Sports Foundation and the Australian Business Arts Foundation Cultural Gift Funds are run on similar lines.

Foundation for Rural & Regional Renewal FRRR works by attracting support (cash and in kind) from businesses and other trusts and foundations, private individuals and communities. These donations are then distributed through a number of programs as grants for the benefit of rural and regional Australia. Communities and projects wanting support send in written applications. These are then assessed. The FRRR board then approves projects, according to available resources and FRRR staff distribute grants accordingly. At the completion of each project, recipients are required to provide a project report.

The Australia Cultural Fund (ACF) is AbaF’s arts donation service. You can make tax deductible donations to the Fund, supporting artists whose work you believe in*. Arts projects you can donate to -

of 37 including visual and performing artists, filmmakers, writers, composers, small arts companies, and more. Donations have been used to support education, tours, exhibitions, publications and performances. * Family members of recipients cannot donate through AbaF and receive a tax deduction.

The Australian Sports Foundation (ASF) can assist Australian non-profit, incorporated and other eligible organisations such as the following with sport related projects: o sporting clubs o sporting organisations (regional, state and national) o schools o councils and o community groups The ASF can also offer a unique tax advantage to individuals, businesses and philanthropic donors.

Other Funding Options

In summary, in the short term most philanthropic structures will not be able to make grants to most information philanthropy organisations as many such organisations do not meet the current definitions of charity. Likewise major donors will also be reluctant to fund these organisations without DGR status to receive a tax deduction.

However there are several other funding options: . many corporations and businesses are able to fund these organisations as a tax deduction may not be a requirement. . encouraging “micro-donations” of $1 or $2 through on-line options – attracting a large number of small donations without the need for DGR status . enlisting the services of volunteers.

Most donors (individuals, business/corporates, and philanthropic foundations and trusts) will want to fund structures rather than individuals. Organisational structures, particularly not-for-profit structures, have the advantage of meeting ATO requirements, which then offers legitimacy and credibility inspired by this level of reporting. This gives a certain level of comfort to donors.

Corporate and business funding and support

Individuals and Organisations without DGR and TCC status can obtain funding from corporations and businesses as tax deductibility may not be a requirement.

In 2007, The Centre for Corporate Public Affairs and the Business Council of Australia released its report “Corporate Community Investment in Australia 2007”. The report has found: • Most companies now see Corporate Community Investment (CCI) as an ‘integral component to strategy and the corporate business model’, with a quarter of firms now requiring a business case with which to focus their investment and engagement in the community; • Volunteering is now a major driver of CCI activity as companies seek to directly involve their employees – who are increasingly focused on the reputation and values of companies – in their CCI strategies and programs; • More Boards and CEOs are now involved in setting overall strategic directions for their companies’ CCI activities;

of 37 • Companies are becoming more discerning in their CCI engagement, focusing on more rigorous identification and selection of potential community partners, NGOs [non-government organisations] and activities; • Partnerships with community groups and NGOs are being established with clear, contractual agreements that specify mutual objectives and ensure clarity in roles and responsibilities; and • Almost half of all companies now set aside a specific budget for CCI, although many companies still report difficulties around measurement of CCI outcomes.

Support from corporations and businesses may be through some type of CCI, mostly through sponsorship and/or through the provision of social investment grants. Increasingly corporations and businesses are linking their CCI to their business strategy and are supporting those organisations that fit this alignment.

While information philanthropy is new to Australia, overseas organisations such as Google.org and the Omidyar Network already invest in information philanthropy initiatives. Neither of these organisations are not-for-profit organisations or foundations so both these organisations support not-for-profit and for- profit initiatives in the information philanthropy space. In the USA where there are increasing concerns about the narrow concentration of the media, organisations like the Huffington Post are also setting information philanthropy initiatives.

Examples:

Google.org http://www.google.org/foundation.html Google.org supports efforts to generate accountability and "bottom up" citizen engagement to influence the quality of public services. They will support efforts to provide easily accessible information to people so that they can choose the best strategy for themselves and their community. Google.org will use multiple modes of communication (such as media, mobile, e- kiosks and other technologies) to allow a broader range of people to access information and they will seek innovative methods for disseminating information. They are focused on:  Informing individuals and communities of their rights, entitlements, choices, and quality of public services  Providing tools and information to increase access to and use of available services  Supporting civil society organizations that strengthen links between communities and policy makers.

Omidyar Network http://www.servicelearning.org/instant_info/funding_sources/index.php?popup_id=1113 The Omidyar Network is a philanthropic investment firm. They invest in market-based efforts that catalyse economic, social and political change. In their investment area Media, Markets, and Transparency they support technology that promotes transparency, accountability, and trust across media, markets, and government. They invest in technology platforms that connect individuals with shared interests, encourage people to engage on critical issues, and increase access to credible information to enable more informed decision-making. Through the power of technology, they aim to reach people more efficiently and thereby maximize these benefits for millions of people, enabling them to engage more productively with one another and in society. Investment Areas:

of 37  Social Media: encouraging people to express themselves, connect to others with shared interests, and take action on what matters to them  Marketplaces: fostering greater choice, transparency and accountability, so that people can provide and access products and services that improve their lives  Government Transparency: encouraging accountability and effectiveness of government by increasing people’s access to credible information about government activities and money in politics They pursue these investment areas in the U.S. and select regions outside the U.S.

Huffington Post Investigative Fund http://taylorw.wordpress.com/2009/03/30/philanthropic-funding-for-investigative-journalism/ The Huffington Post Investigative Fund is an independent nonprofit journalism venture based in Washington, D.C. They aim to be an online innovator of investigative reporting by merging the classic watchdog function and traditional values of the press with the best tools of new media.

Following the lead of the USA, it is reasonable to assume that many IT companies based in Australia would be interested in this area. In addition, given the very public pronouncements by News Corporation and Fairfax Media around need for greater freedom of information, media organisations may also be interested in supporting information philanthropy.

Corporations and businesses may also consider other methods of supporting information philanthropy. Sponsorship of the website may well be an option if the goals or activities of the information philanthropy not-for-profit organisation align with those of the corporation or business.

Increasingly technology is being harnessed to help raise funds. For example, encouraging micro- donations of say $1 or $2 [which don’t receive a tax deduction] through on-line options enable thousands and thousands small donations to be aggregated into large sums.

Example:

Footprints Network Alliance http://www.footprints.org.au/ The Footprints Network is an alliance of e-commerce businesses and their customers. It emerged following the devastating Asian Tsunami in 2004, and from there it has grown into an independent network of e-commerce businesses that share the same ethics and values and, through technology, want to change the world in which they live and do business. Using web technologies, Footprints aggregates thousands of their micro-donations made with online transactions, to fund community development projects that help end poverty. They don’t offer a tax deduction facility. They bypass that, believing that if you can afford to throw a dollar in a charity bucket in the street then you can afford to tick the dollar donation box online, without the tax deduction option. In 2008 they raised $188,000.

of 37 5. RECOMMENDATIONS

1. That the Government 2.0 Taskforce make a submission to the Productivity Commission:  highlighting the complexity of the definition of charity and charitable status; and  recommending the adoption of a statutory definition of charitable purposes that incorporates the addition of a new DGR category on ‘information philanthropy’, based on the definition of information philanthropy as philanthropic support for those not-for-profit organisations whose mission/purpose is to use or enable use or reuse of information in an on-line environment to increase community empowerment and civic participation for beneficial social change, with particular reference to use and re-use of public sector information. (deadline for submissions: 24 November 2009)

2. That given the budgetary constraints any reforms emanating form the Productivity Commission and the Henry Tax Review may need to be implemented over time, that the Government 2.0 Taskforce apply to the Federal Government to establish a Specially Listed Deductible Giving Recipient Foundation (Item 2), similar to the Australian Sports Foundation, to enable grants and subsidies from philanthropic donors to registered Australian not-for-profit organisations for the purposes of the initial development of projects that  Reuse and re-mix Australian Government PSI for public access and benefit  Engage communities in projects that seek to enhance our democracy or the democratic process and the development of public policy. Funded organisations must present a model for ongoing sustainability and should be structured and purposed to seek independent TCC and DGR status as their projects mature. Projects must be non- partisan.

of 37 Bibliography

Anheier, H. and Leat, D., Creative Philanthropy. Routledge, London, 2006.

Cabinet Office Strategy Unit. Private Action, Public Benefit: A review of charities and the wider not-for- profit sector. September 2001. http://www.cabinetoffice.gov.uk/media/cabinetoffice/strategy/assets/strat %20data.pdf Accessed 26 October 2009.

Canada Revenue Agency ‘Charities and Giving’ - http://www.cra-arc.gc.ca/charities/ - accessed 14 October 2009

Charities Commission Home Page - http://www.charities.govt.nz/ - accessed 14 October 2009

Frumkin, P. “Strategic Giving: The Art and Science of Philanthropy”, University of Chicago Press, 2006

The Home Office. Charities and Not-for-Profits: A Modern Legal Framework. July 2003. http://www.cabinetoffice.gov.uk/media/cabinetoffice/third_sector/assets/charitiesnotforprofit_eng.pdf

Internal Revenue Service, Tax Exempt Status for Your Organization. http://www.irs.gov/pub/irs- pdf/p557.pdf Accessed 14 October 2009.

Mulgan, G., Steinberg, T. with Salem, O., Wide Open: Open source methods and their future potential”, Demos, UK, 2005

Office of the Third Sector, Charities Bill background. http://www.cabinetoffice.gov.uk/third_sector/law_and_regulation/charities_act_2006/background.aspx Accessed 26 October 2009.

Sheppard, I., Fitzgerald R., and Gonski, D. Report of the Inquiry into the Definition of Charities and Related Organisations, CanPrint Communications, June 2001.

Productivity Commission 2009, Contribution of the Not-for-Profit Sector, Draft Research Report, Canberra 2009.

Reference Material

Ward, D. “Trustee Handbook: Roles and duties of Trustees of Charitable Foundations and Trusts in Australia”, Philanthropy Australia, 2008

Meachen, V. “Grantseekers Guide to Foundations and Trusts”, to be published by Philanthropy Australia in December 2009

APPENDIX:

of 37 Foundation for Rural & Regional Renewal www.frrr.org.au

The Foundation for Rural and Regional Renewal FRRR was established as a partnership between the major philanthropic trust, the Sidney Myer Fund and the Federal Government through the Department of Transport and Regional Services. FRRR continues with the generous and unfailing support of our patrons Particularly Mr Baillieu Myer AC, son of the late Sidney Myer and former Deputy Prime Minister the Hon John Anderson MP, whose joint efforts in sponsoring the Regional Australia Summit in October 1999 initiated the FRRR concept.

FRRR works by attracting support (cash and in kind) from businesses and other trusts and foundations, private individuals and communities. These donations are then distributed through a number of programs as grants for the benefit of rural and regional Australia.

Communities and projects wanting support send in written applications. These are then assessed. The FRRR board then approves projects, according to available resources and FRRR staff distribute grants accordingly. At the completion of each project, recipients are required to provide a project report.

Objectives of the Foundation

FRRR has been established as a partnership between philanthropy, governments and business to stimulate rural and regional renewal in Australia.

FRRR takes a leadership role in assisting regional communities to respond to social, cultural and economic change. In addition we collaborate with communities around Australia and strengthen their capacity to drive change. FRRR encourages innovation and creativity from rural and regional communities.

FRRR's objective is to promote for the public benefit rural and regional renewal, regeneration and development in Australia in social, economic, environmental and cultural areas.

FRRR aims to achieve its objectives including the funding support of projects to meet the following objectives and have a real potential to achieve significant results for people within rural and regional Australia.

 Promote for the public benefit, rural regeneration and development in Australia in social, economic, environmental and cultural areas.  Add value to the work of rural organisations to resolve regional development issues at a national and local level.  Strengthen regional capacity for growth, development and adjustment in the context of national and global change.  Develop new ideas and methods through thinking, researching, debating, testing and informing to address issues facing regional and rural Australia  Strengthen the regional and rural voice to ensure vigorous regional and rural participation in national growth and development.

of 37  Provide facilitation services to assist groups to lead and face change so that regional and local communities can choose paths to their futures.  Raise money and other resources (both tax deductible and non-tax deductible) for the operation of the national body and the funding of national services and programs to resource rural Australia.  Raise money and other resources (both tax deductible and non-tax deductible) for direct use by regions for projects and/or seed funding for local capacity building and funding bodies.  Provide expertise and support to local and regional bodies to assist them to raise funds for local capacity building projects and initiatives.

How it works FRRR works by attracting support (cash and in kind) from businesses and other trusts and foundations, private individuals and communities. These donations are then distributed through a number of programs as grants for the benefit of rural and regional Australia.

Communities and projects wanting support send in written applications. These are then assessed. The FRRR board then approves projects, according to available resources and FRRR staff distribute grants accordingly. At the completion of each project, recipients are required to provide a project report.